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WiFi Price War Whacks Conexant

Third-quarter revenue will be sharply below estimates.

Conexant's ( CNXT) third-quarter revenue will fall about $40 million short of estimates because of a price war breaking out among WiFi chip suppliers.

Red Bank, N.J.-based Conexant expects to earn an adjusted 2 cents a share on revenue of $265 million to $270 million in the three months to July 2. Analysts surveyed by Thomson First Call were forecasting earnings of 5 cents a share on revenue of $313 million. The stock, which fetched as much as $6.50 as recently as April, was getting crushed on the Instinet premarket session, recently down $1.01, or 25%, to $3.07.

Conexant cited poor results in its wireless networking division for the shortfall, saying an influx of cheap chipsets from Taiwanese exporters allowed resellers of competing products to lower prices dramatically. The Asian onslaught was profound enough essentially to wipe out the price difference between the old 11-megabit-per-second 802.11b WiFi standard and the new 54-megabit-per-second 802.11g standard, according to Conexant.

"Wireless LAN as a standalone business will continue to be challenging, but we plan on protecting and expanding our position as we see an outstanding growth opportunity moving forward with wireless connectivity becoming ubiquitous in various devices and appliances," Conexant said. "We remain committed to participating and continuing to lead in this important market segment."

A handful of Conexant peers were also lower on the warning, including Applied Micro ( AMCC), down 27 cents, or 5.6%, to $4.53; PMC Sierra ( PMCS), down 64 cents, or 5%, to $12.31; and Broadcom ( BRCM), down $1.15, or 2.7%, to $42.